The world of foreign exchange trading is filled with jargon, but few terms are as pivotal—and as misunderstood—as Tomorrow Next (Tom Next). For Australian investors and businesses operating in international markets, understanding Tom Next is crucial to managing currency risk and optimising trade execution. With 2025 bringing new regulatory clarity and shifts in trading patterns, now is the ideal time to get across how Tom Next works and why it matters.
What is Tomorrow Next (Tom Next)?
Tom Next, short for ‘Tomorrow to Next’, refers to a short-term forex transaction that rolls an open position from one trading day to the next. Rather than settling a currency trade on the standard ‘spot’ date (usually two business days after the trade), Tom Next allows traders to extend the settlement by a day—effectively buying one currency today and selling it back tomorrow. This mechanism is foundational for banks, institutional traders, and increasingly, sophisticated retail investors who wish to maintain open positions without triggering physical currency delivery.
- How it works: At the end of each trading day, positions can be ‘rolled over’ using Tom Next swaps, with interest rate differentials and market liquidity determining the cost or benefit.
- Who uses it: Major banks, Australian importers/exporters, and forex trading desks rely on Tom Next to manage liquidity and hedge short-term currency risk.
- Why it matters: For active traders, Tom Next minimises the administrative hassle of physical delivery and offers a way to profit (or pay) from interest rate differentials between currencies.
Tom Next in the 2025 Australian Forex Landscape
As of 2025, several regulatory and market trends have shaped the use of Tom Next in Australia. The Australian Securities and Investments Commission (ASIC) has continued its focus on transparency and fair pricing in forex markets, which includes how rollover rates (the cost or credit of Tom Next) are disclosed to clients. In addition, the Reserve Bank of Australia’s (RBA) ongoing adjustments to the cash rate have led to more pronounced interest rate differentials against major currencies, influencing Tom Next swap rates.
- ASIC’s 2025 Disclosure Rules: Brokers and banks must now provide clearer breakdowns of Tom Next charges and credits, helping traders make more informed decisions and reducing hidden costs.
- RBA Rate Movements: With the RBA’s cash rate holding at 4.1% in early 2025, Tom Next swaps involving AUD/USD and AUD/EUR pairs have seen increased volatility, especially as global central banks diverge on policy.
- Market Liquidity: As algorithmic and high-frequency trading continues to grow in Australia, Tom Next volumes on major currency pairs have reached record highs, allowing for tighter spreads but also requiring more sophisticated risk management.
For example, an Australian exporter hedging a future USD payment might use Tom Next swaps to keep their hedge open, benefitting from positive carry if the interest rate differential is in their favour.
Practical Implications: Costs, Opportunities, and Risk Management
Understanding Tom Next is not just academic—it can have a real impact on the bottom line for traders and businesses. Here’s how:
- Cost Management: The difference between the interest rates of two currencies (the ‘swap rate’) determines whether you receive or pay on a Tom Next rollover. For example, holding a long AUD/JPY position when the RBA’s rate is higher than the Bank of Japan’s may result in a daily credit to your account.
- Strategic Trading: Some traders actively seek carry opportunities by holding positions in high-yielding currencies, using Tom Next to roll positions indefinitely. However, this exposes them to currency risk and sudden central bank moves.
- Corporate Hedging: Australian businesses with global supply chains use Tom Next to manage their short-term FX exposures, especially around major payment dates or when awaiting invoices.
With greater transparency in 2025, it’s now easier for all market participants to compare Tom Next rates across brokers. Leading platforms also allow users to view projected Tom Next charges before executing trades, helping with cash flow planning and risk management.
How to Make Tom Next Work for You
Whether you’re a retail trader, SME, or CFO at a multinational, Tom Next is a tool to help optimise your FX strategy:
- Check your broker’s Tom Next rates daily—these can change with market conditions and central bank announcements.
- Understand the net impact on your positions: Are you earning or paying to hold your trade overnight?
- Factor Tom Next costs into your broader trading or hedging strategy, especially in volatile rate environments.
- Stay on top of ASIC and RBA updates, as 2025 is shaping up to be another year of policy surprises.
In a market where small details can make a big difference, mastering Tom Next is a must for anyone serious about forex in Australia.
